After a six-year journey through the federal court system, the
U.S. Supreme Court issued its ruling in the landmark case of
Murphy v. National Collegiate Athletic Association,
allowing states to legalize sports betting.

The Court held, in a 6-3 decision written by Justice Samuel
Alito, that the Professional and Amateur Sports Protection Act
(PASPA), which made it unlawful for a state to
"authorize" sports gambling schemes, was an
unconstitutional "commandeering" of state laws and
regulations by the federal government. In practice, the ruling will
allow any state that so chooses to move forward with the creation
and enforcement of a legislative or regulatory scheme that allows
individuals to bet on sporting events within its borders.

Professional and Amateur Sports Protection Act

PASPA, enacted by Congress in 1992:

made it "unlawful for a governmental entity to sponsor,
operate, advertise, promote, license, or authorize by law or
compact" (28 U.S.C. Section 3702(1)) any sports betting
scheme; and

made it "unlawful for a person to sponsor, operate,
advertise, or promote, pursuant to the law or compact of a
governmental entity," (28 U.S.C. Section 3702(2)) any sports
betting scheme, with exceptions for the four states that already
permitted sports gambling: Nevada, Delaware, Montana, and
Oregon.

The New Jersey Challenge

Seeking to provide a flagging Atlantic City with a financial
boost, New Jersey enacted legislation in 2012, and after it was
quickly challenged, new legislation in 2014, to allow sports
betting in the state. The National Collegiate Athletic Association
(NCAA) and major sports leagues opposed New Jersey's laws on
the grounds that they violated the "governmental entity"
restriction in PASPA.

In ruling in favor of New Jersey, the Court turned to an
analysis of the basic foundations of the American system of
federalism. While Congress is entitled to make laws that are
enforced at the federal level, Congress may not "simply
commandeer the legislative processes of the States by directly
compelling them to enact and enforce a federal regulatory
program." In essence, Congress can enact federal law which
must be enforced by the federal government, but cannot require
states to enact specific laws, or compel states to enforce federal
laws.

The exact wording of PASPA's 3702(1) provision prohibited
states from enacting state-level laws that allowed any sports
betting scheme, and therefore violated this anti-commandeering
requirement. The Court noted that Congress could have created a
direct federal ban on sports betting, but instead phrased it as a
ban on states creating legal sports betting regimes. The NCAA and
other respondents argued that PASPA's section 3702(2) did just
this (by making it unlawful for "any person" to engage in
sports betting that is authorized by state law), and many feared
that the Court would invalidate 3702(1) while upholding 3702(2).
Yet the Court held that, should Section 3702(1) be rendered
unconstitutional, the rest of the PASPA statute must be stricken as
well because it cannot stand on its own in a coherent manner. If a
state has the ability to make sports betting legal, then an
individual acting "pursuant to [that] law" is not acting
unlawfully.

Changing Views on Sports Gambling

While the decision will not open the floodgates for any American
to immediately place a bet on tonight's game, it represents a
sea change in the nation's views on sports betting. Most states
still have laws in place that significantly restrict gambling of
any kind, including sports gambling. But, several states besides
New Jersey, including Connecticut, Pennsylvania, West Virginia, and
Mississippi, have recently passed bills in the pre-emptive hope
that this case would strike down PASPA and allow them to quickly
move ahead with implementing a sports gambling regime.

Following the decision, New Jersey is likely on track to allow
sports betting in a few weeks or months, and other states are close
behind. Numerous other state legislatures have introduced, but not
passed, similar statutes. It may take a year or more for these
states to fully allow sports betting within their borders. As with
the repeal of prohibition, though, it now becomes a matter of when,
not if, sports gambling will spread beyond Nevada, Delaware,
Montana, and Oregon.

Even many of the sports entities that defended PASPA against New
Jersey's claims have signaled an openness, even eagerness, to
expand sports betting. The NCAA remains vehemently opposed to the
legalization of sports betting, and many professional leagues
issued press releases focused on maintaining the integrity of
sporting events. At the same time, the National Basketball
Association (NBA) and Major League Baseball (MLB) have both floated
the idea of taking a percentage of all revenue generated by
gambling on their sports as an "integrity fee." NBA and
National Hockey League (NHL) owners have applauded the decision as
potentially doubling the value of their franchises. With so much
money at stake, it will be difficult to put this genie back in the
bottle.

The Road Ahead

The invalidation of PASPA's 3702(2) creates many
opportunities for marketers and others seeking to capitalize on the
legalization of sports gambling. However, marketers and their
agencies should keep in mind the restriction on advertising or
promoting an illegal activity. Therefore, until a particular state
legalizes sports betting, no advertising related to these
activities should take place. Moreover, unless the federal
government responds with new nationalization, the framework for
sports gambling will likely be a patchwork of inconsistent and, in
many cases, conflicting laws. For example, only Delaware, Nevada,
New Jersey, and Pennsylvania allow online gambling. Some states may
limit sports gambling to traditional casinos, while others may
enable mobile betting. Some may limit gambling to games only, while
others may permit any number of prop and exotic bets. Traditional
gambling powerhouses will likely face off against industry upstarts
seeking to disrupt an industry on the precipice of transformation.
As this landscape transforms, any promotional campaigns regarding
sports betting will need to carefully navigate these
restrictions.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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